Your Right to Know

With a new study confirming that the nation’s credit-reporting system is harming consumers, Ohio
Attorney General Mike DeWine joined a chorus of consumer advocates yesterday calling on Congress to
fix the problems now.

The Federal Trade Commission released a study yesterday that says 40 million people have errors
in their credit files. The study is based on a survey of 1,001 people and their 3,000 reports — one
report from each of the three large credit-reporting agencies.

It said that one in five people might have serious mistakes that make it harder for them to buy
a house or auto, rent an apartment, land a job or qualify for cheaper auto and home insurance.

The FTC report, mandated by Congress in 2004, mirrors a yearlong
Dispatch investigation in 2012 that found Americans are plagued by errors and are
virtually powerless to correct problems on their credit reports.

“Congress should hold hearings. The evidence is there. The evidence is overwhelming that the
(credit-reporting) agencies are violating the law,” DeWine said.

As a result of the
Dispatch’s “Credit Scars” series, DeWine and at least two dozen other state attorneys
general launched an investigation into the inner workings of the three national credit-reporting
agencies: Experian, Equifax and TransUnion.

The agencies are governed by the Fair Credit Reporting Act, which requires them to investigate
errors. But as
The Dispatch reported in May, consumers rarely can win a battle with a credit-reporting
agency without the help of an attorney general or the court system.

“They have designed a system that is a very automated system, that is not designed to find the
truth,” DeWine said.

The FTC study involved 1,001 participants randomly selected to match the national distribution
of credit scores. Those consumers reviewed their credit reports and filed disputes to correct what
they considered to be errors.

Sixteen percent of the participants were unable to persuade agencies to fully correct errors. “
If true errors remain . . . the current FCRA (Fair Credit Reporting Act) dispute process is not
serving these consumers well,” the FTC concluded.

A consumer’s complaint is reduced to a two-digit code and sent electronically to the creditor
that is the subject of the possible mistake. The credit-reporting agencies almost never forward
documentation supplied by consumers to prove their cases.

Officials of the Consumer Data Industry Association, the lobbying group for the three
credit-reporting agencies, didn’t respond to a request by
The Dispatch for comment.

The FTC has been studying the accuracy of credit reports since 2004 but has not taken action
against the credit-reporting agencies. Last year, the relatively new Consumer Financial Protection
Bureau took over as the chief watchdog of the three credit-reporting agencies. The bureau released
a report in December that also raised concerns about the accuracy of credit reports, but it has yet
to require changes.

Congress has held numerous hearings on the issue over the years but also has not taken
action.

DeWine and others said consumers deserve better.

Changes could have prevented years of frustration and financial hardship for Judy Thomas of
northeastern Ohio. The credit-reporting agencies mixed her credit information with that of a
similarly named woman in Utah who had terrible credit and massive debt.

Thomas, who was featured in the “Credit Scars” series, had to file a lawsuit to untangle the
financial mess created by the credit-reporting agencies.

“Our leaders want to stimulate the economy but aren’t being diligent in making sure that
citizens can use their credit the right way,” said Thomas, a 52-year-old nursing supervisor in
Elyria near Cleveland. “We know there’s a huge problem, and I hope things get done to make it
better. I don’t want my children or anyone to go through this like I have.”

Sen. Sherrod Brown, D-Ohio, who held a hearing on credit-reporting issues in Washington in
December, said the FTC report is further proof that consumers are too often victimized by their
credit reports. “The consumer credit-reporting agencies treat consumers as guilty until proven
innocent,” he said. “Consumers must provide evidence when they challenge a credit score, but
creditors are taken at their word.”

Industry observers say it’s time to make real changes. The National Consumer Law Center in
Boston, for example, has long been a thorn in the sides of the credit-reporting agencies, and it
again called for action.

“It’s unconscionable that 40 million American have errors in their credit reports, and that 10
million have errors grave enough to cause them to be denied or charged more for credit or insurance
or even be denied a job,” staff attorney Chi Chi Wu said in a statement. “There needs to be serious
and wholesale reform of the credit-reporting industry.”

Despite all the calls for action, Judy Thomas is still skeptical — worried that reforms won’t
come and that the other Judy’s bad credit will haunt her again.

Those mistakes almost cost her job in 2010.

“It’s been just such a tough road, and those companies are so powerful,” she said. “I’ll believe
it when I see it, if they make real changes.”